Regardless of your age, creating a will is an important part of your financial planning. If you die without one, the legal consequences can be disastrous, especially if you have a lot of assets. Let’s examine some of the many reasons why having a will is so important.
Take care of your loved ones. Your will helps you plan for their financial future and provides comfort in knowing that you are safeguarding your assets and financially caring for the people you love.
Safeguard your children. For most parents, the welfare of their children is a primary concern. Planning for the legal guardianship of your children is of major importance and yet many parents fail to do so. If both parents die without designating a guardian, it falls to the courts to make this weighty decision. Not only is there the risk that they won’t choose the person you would have, but the process is extremely stressful for any children having to endure it. This unfortunate situation is entirely avoidable simply by stating your chosen legal guardian in your will.
Take control of your assets. Creating a will gives you sole discretion over the distribution of your assets and property. You can decide how your belongings, such as family heirlooms and automobiles, should be distributed. If you have charitable interests or organizations that you support, you can direct assets to be given to them. Having a will allows your investments or business dealings to be smoothly transitioned, as well. Without a will, your assets will be distributed according to the state laws where you lived and/or owned real property at the time of your death, and these laws can vary widely. A surviving spouse might get everything in one state but only one-third in another, with the rest going to your children. If you have no children, half might go to a spouse and half to your parents.
Reduce the tensions of survivors. Dying intestate can cause infighting among those closest to you. It often leads to bitter and costly disputes over inheritances that inevitably reduce the size of the estate. You don’t have to look far to find sad examples of once-loving families that were torn apart because a deceased family member failed to make a will.
Minimize your tax liability. A will is a very useful tool in estate planning and you can use it to ensure as much of your legacy as possible is passed on to your beneficiaries. For example, you can transfer some of your property while you're still alive. Known as an inter vivos gift, it reduces your taxable estate because you don't own it anymore so it can't be taxed. Other ways to avoid estate and inheritance taxes include creating a trust or purchasing a life insurance policy. On the other hand, significant tax consequences may arise for your estate, as well as your heirs, if you don't have a will and don't provide for any tax avoidance methods. Both federal and state governments may impose taxes on the transfer of your property, and a tax may also be imposed on the property distributed to your heirs.
Avoid costly legal expenses. With no will to protect their interests, your partner and/or your dependents might find themselves having to hire a lawyer to contest the laws of intestacy. These cases are often extremely complex and can become quite costly. They can drag on for lengthy periods and the results can’t be guaranteed. Intestacy also means that no executor has been assigned, so an administrator must be appointed. Applying to the court for letters of administration often leads to additional costs and complexities.
There’s only one way to ensure that your dying wishes for your estate are adhered to and that’s by making a will. The process is necessary and fairly simple, and it can save your loved ones a lot of time, money, and grief while granting you peace of mind.